BUSINESS NEWS FROM FINLAND
BUSINESS NEWS FROM FINLAND
Finland's Economy Heading Out of Recession — But Don't Expect Fireworks
Bank of Finland sees a gradual recovery taking hold from 2026, even as public finances stay deep in the red
Finland's Economy Heading Out of Recession — But Don't Expect Fireworks
Bank of Finland sees a gradual recovery taking hold from 2026, even as public finances stay deep in the red
PUBLISHED June 28, 2026
A Slow Emergence From Recession
According to the Bank of Finland’s December 2025 forecast, Finland’s economy is emerging from a phase of extremely low growth. Nevertheless, although the economy will improve, there is no strong expansionary phase in sight in the immediate years ahead. Growth for the full year 2025 will be just 0.2 percent, before rising to 0.8 percent in 2026, 1.7 percent in 2027, and levelling out at 1.5 percent in 2028. By the end of the forecast period, growth will sit above Finland’s long-term potential as a result of cyclical factors rather than any structural transformation.
Households Finally Get Some Breathing Room
Due to the weakened labour market and still-fragile consumer confidence, 2025 will show no growth in private consumption at all. That changes in 2026, when real earnings growth gathers pace and the labour market gradually strengthens. Purchasing power will also be boosted by a reduction in the amount of interest payments made by households, as lower rates ease the burden of mortgages and consumer loans. As growth picks up, the labour market will continue to recover, strengthening consumer confidence and supporting consumption growth further into 2027 and 2028
Investment Rebounds, Driven by Data Centres and Green Projects
Business investment will show a modest further contraction for 2025 as a whole, but will rebound to growth in 2026 and remain strong through 2027 and 2028. The driving forces behind this rebound include data centre investments and green transition projects — even as uncertainty and low production capacity utilisation curb some investment plans. Housing construction, by contrast, will remain a weak spot: new-build activity is being held back by a difficult market for new homes, though conditions should ease gradually as household incomes and confidence improve.
Exports Hold Up Despite Geopolitical Headwinds
Export growth will be solid for 2025 as a whole, reflecting brisk growth in goods exports even as service exports have slowed. A gradual improvement in export markets, combined with rising investment demand from worldwide interest rate cuts, will support a modest increase in Finland’s exports through 2026 to 2028. Geopolitics and trade policy tensions, however, will continue to curtail demand for some time to come. Imports, meanwhile, will grow considerably — bolstered in particular by defence procurement.
Exports Hold Up Despite Geopolitical Headwinds
Export growth will be solid for 2025 as a whole, reflecting brisk growth in goods exports even as service exports have slowed. A gradual improvement in export markets, combined with rising investment demand from worldwide interest rate cuts, will support a modest increase in Finland’s exports through 2026 to 2028. Geopolitics and trade policy tensions, however, will continue to curtail demand for some time to come. Imports, meanwhile, will grow considerably — bolstered in particular by defence procurement.
Inflation Stays Low, For Now
Inflation has fallen towards the end of 2025 to below 1.5 percent and will remain close to this level through 2026. In the early part of the forecast period, price pressures will be held down by the weak economy and only modest increases in import prices — but rising wages will work in the opposite direction. Inflation will climb gradually as the economy strengthens, reaching 1.9 percent by 2028, a level still comfortably below the European Central Bank’s 2 percent target.
Labour Market Recovery Pushed Back Again
A turn for the better in the labour market has once again been delayed due to weak cyclical conditions. Although the employment rate will rise in the years ahead, the unemployment rate will still sit at almost 9 percent in 2028. Labour force participation and the overall supply of labour will remain high, and while the employment rate will climb steadily throughout the forecast, it will still fall short of its 2022 peak by the end of the period — underscoring just how deep and lasting the damage from the recession has been.
Public Finances: The Problem That Won't Go Away
Finland’s public finances are deeply in deficit, and public debt continues to grow. The general government deficit will reach 3.7 percent of GDP for 2025. Fiscal consolidation between 2025 and 2027 is being implemented through cuts in public expenditure and increases in indirect taxation, but reductions in personal and corporate income taxes will slow the pace of adjustment. Major defence investments from 2026 onwards will initially deepen the deficit again, before it shrinks only marginally in the following two years. The public debt-to-GDP ratio will exceed 88 percent in 2025 and climb to 93 percent by 2028 — a trajectory the Bank of Finland flags as one of the defining risks to the country’s medium-term outlook.
Inflation Stays Low, For Now
Inflation has fallen towards the end of 2025 to below 1.5 percent and will remain close to this level through 2026. In the early part of the forecast period, price pressures will be held down by the weak economy and only modest increases in import prices — but rising wages will work in the opposite direction. Inflation will climb gradually as the economy strengthens, reaching 1.9 percent by 2028, a level still comfortably below the European Central Bank’s 2 percent target.
Labour Market Recovery Pushed Back Again
A turn for the better in the labour market has once again been delayed due to weak cyclical conditions. Although the employment rate will rise in the years ahead, the unemployment rate will still sit at almost 9 percent in 2028. Labour force participation and the overall supply of labour will remain high, and while the employment rate will climb steadily throughout the forecast, it will still fall short of its 2022 peak by the end of the period — underscoring just how deep and lasting the damage from the recession has been.
Public Finances: The Problem That Won't Go Away
Finland’s public finances are deeply in deficit, and public debt continues to grow. The general government deficit will reach 3.7 percent of GDP for 2025. Fiscal consolidation between 2025 and 2027 is being implemented through cuts in public expenditure and increases in indirect taxation, but reductions in personal and corporate income taxes will slow the pace of adjustment. Major defence investments from 2026 onwards will initially deepen the deficit again, before it shrinks only marginally in the following two years. The public debt-to-GDP ratio will exceed 88 percent in 2025 and climb to 93 percent by 2028 — a trajectory the Bank of Finland flags as one of the defining risks to the country’s medium-term outlook.
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